Merchant Loan Or SBA Loan?

The recession has sent many small business owners on a rollercoaster ride when it comes to securing funds for their businesses. First, in 2008, small business owners saw bank lending standards tighten dramatically, making it nearly impossible to get a bank business loan.

Recently, laws were passed to regulate consumer credit providers, in attempt to decrease consumer debt. Unfortunately, many credit card companies raised rates on business credit cards to compensate. As a result, some merchants were forced to close their credit cards while others had their lines of credit taken away from them.

During this financially turbulent time, merchant loans have always been available for small business owners who operate retail and/or service-oriented businesses. But, recently, the Small Business Administration has introduced a new loan program and made some changes to an existing loan program, in order to make it simpler for merchants to gain access to business funds.

Small business owners must now choose which method(s) best suit their businesses.

One new program that the SBA has introduced is the ARC loan program (America’s Recovery Capital), in which struggling small businesses can receive up to $ 35,000 to be used to pay off existing debt. The SBA has also revised its 504 loan program, previously only allotted to small business owners who “…sought new loans to buy real estate, upgrade machinery and make improvements,” (Wall Street Journal). Now, the loans may be used by borrowers who want to “…refinance their existing SBA-backed loans as long as the amount is 50% or less than the total cost of expansion,” (Wall Street Journal).

Merchant loans, but, allow business owners the opportunity to receive up to $ 500,000 in simple, unsecured business funds.

These funds are suitable for merchants who’ve owned their businesses for at least six months and process at least $ 3,500 in monthly credit card sales. The advance is then repaid via a small percentage that is deducted from the business’s daily credit card sales.

Merchants can visit the SBA website to learn more about these loans and determine if they are a excellent fit for their businesses. Merchants can also visit merchant loan websites to get a free quote and to learn more about them and whether they would work best for their businesses.